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Government must secure private sector buy-in and clearly define who a black industrialist is for the black industrialist programme to be a success, according to Edge Growth, a leader in enterprise and supplier development in South Africa.
Addressing a round table discussion on the programme in Sandton, Johannesburg, on Thursday, Amina Patterson, head of business development at Edge Growth, said that, if perfectly executed, the programme could give rise to a new movement of black industrialists who were less dependent on government, and would boost transformation and job creation.
Formally launched by the department of trade and industry in December, government has pledged R1 billion to identify 100 major black industrialists, but the project’s critics dispute its success due to shortcomings in the broad-based BEE programme.
Patterson said: “The black industrialist programme will do well to achieve where broad-based BEE has been unsuccessful, especially around the creation of dependency on government support, if it clearly governs the manner in which opportunities are created for black industrialists.
“It will not be good enough to merely see participation at an ownership level, but operational control and participation must be demonstrated to ensure the transfer of skills and expertise from generation to generation, which is essential to sustainable growth,” she said.
“At the end of the day, the black industrialist will not only be an entrepreneur who conquers the South African market, but the African market too.”
The definition of a black industrialist was also key to making a success of the programme.
“It is critical we define the term ‘black industrialist’ accurately to ensure the selection process is clear and transparent, or the programme will fall victim to [the weaknesses that led to] the criticism of previous empowerment schemes,” said Patterson.
“Secondly, the nature, composition and timing of the support offered must be carefully considered on a beneficiary-by-beneficiary basis, or we risk undermining the black industrialist’s success.”
Velaphi Ratshefola, MD of ABI Bottling, highlighted access to finance and lack of networks as the two main challenges facing the establishment of a vibrant black industrialist sector.
“The lack of required networks and a track record to facilitate market access has often proven to be a barrier to entry,” said Ratshefola, adding that ABI Bottling was searching for a local supplier of a product it was importing for R30 million a year.
He warned that if South Africa’s economy did not become more “inclusive” of the black majority, with full support for such initiatives, economic growth would probably remain in a slump.
Patterson and Ratshefola agreed that the programme should not be expected to succeed overnight and might take years to execute properly.
Edge Growth said government had demonstrated numerous successes in enterprise development through various initiatives.
Patterson added: “In recent times, government has done well to incentivise organisations to manufacture and assemble locally. Unfortunately, companies are not well informed of these incentives, and are also unsure of how to leverage their enterprise and supplier development funds with these incentives to promote localisation initiatives, which, at the core, need the likes of black industrialists to drive them.”
There were a number of sectors that government could look at to boost black industrialist numbers.
“With South Africa facing an energy crisis, the renewable energy sector offers an opportunity to capitalise on it through cost-efficient and energy-effective product and service innovation. There’s also a large presence of automotive manufacturers,” said Patterson.
“The financial services sector is evolving and its leaders are becoming customer-centric by offering innovative and practical access to their products, but have massive legacy system issues preventing them from implementing solutions with the agility of external service providers.
“There are still huge gaps in appealing to the unbanked market, both in South Africa and Africa at large, leaving a captive audience,” she said.
Edge Growth said mentors, financiers, the private sector and companies South Africa bought from internationally needed to be roped in to develop strategies that benefited a local, African and southern hemisphere presence.
As an example of a black industrialist, MD of ABI Bottling Velaphi Ratshefola offers the example of David Ramela, an employee of ABI supplier DDK Merchandising, who sold his home to buy the supplier business.
“DDK was one of a number of suppliers of merchandising solutions to ABI. Such was the desire to harvest the potential of the business, Ramela made the decision to sell his home to purchase a 60% share in the business.
Soon after, he acquired the remaining 40%. Over the course of a few years, he grew the company from a turnover of R18 million and 56 staff in 2005, to a turnover of R135 million and a staff complement of 3 000 today.
“Through its offering to ABI, DDK has been able to build a track record of success that has allowed market access to other opportunities. Ramela is a prime example of a successful black industrialist.
